Racketeer Suspect Gives Up Assets

Rothstein Creditors List Emerges

December 4, 2009|By Paula McMahon, Staff Writers

Disbarred lawyer and accused racketeer Scott Rothstein has quietly reached a deal with federal prosecutors to turn over control of his waterfront homes, fancy automobiles and multiple business interests to the government, according to documents made public Thursday.

While he was still free, Rothstein signed an agreement with prosecutors Nov. 16 not to fight a civil forfeiture action to seize his assets. He gave up 22 properties, more than a dozen sports cars, an 87-foot yacht and interests in more than 100 business entities.

He also surrendered $1.26 million in a Fidelity Investments stock account and 304 watches or pieces of jewelry.

Rothstein's attorneys, Marc Nurik and Michael Seese, said Rothstein wanted to ensure that as much money as possible would be returned to people who invested in what authorities say was a $1.2 billion Ponzi scheme masterminded by Rothstein. The action is not an admission that Rothstein, who was arrested Tuesday, committed any crimes, the lawyers said.

"We decided it would be more appropriate to turn over everything to the government," Nurik said in an interview. Nurik said he negotiated the deal with prosecutors, and Rothstein then signed it.

Rothstein, 47, has pleaded not guilty to federal charges of racketeering, conspiracy to commit money laundering, conspiracy to commit fraud and two counts of wire fraud. He is being held without bond at the Federal Detention Center in downtown Miami.

Meanwhile, the trustee in a bankruptcy case involving Rothstein's former law firm, Rothstein Rosenfeldt Adler, compiled a list of 20 creditors who may be owed the most money. The list is based on bank records and documents from the firm, but may not be complete or even accurate, trustee Herbert Stettin wrote in a filing submitted to U.S. Bankruptcy Court in Fort Lauderdale.

"The books and records that were available are in disarray, inadequate and do not contain the typical records that one would expect to be maintained in the normal course of business," Stettin wrote, adding that federal agents seized some records before they could be analyzed.

The creditors reported putting in a total of $1.2 billion that was deposited into the law firm's accounts since January 2007, according to Stettin's filing. The figure does not reflect "possibly substantial" payments that investors may have gotten back, he said, and is based on incomplete records from the law firm and the banks that held the firm's money, TD Bank and Gibraltar Private Bank & Trust.

Many of the RRA employees who could have helped decipher the books have left, "are under investigation by the federal government or have refused to cooperate," Stettin wrote. He declined to comment after a bankruptcy court hearing Thursday afternoon.

About two-thirds of the investor money being reported, $775 million, came from Fort Lauderdale businessman George Levin's Banyon investment groups. Levin has said, through a spokesman, that he was a Rothstein victim, but he and Banyon are named in a civil lawsuit filed by other investors that alleges they had knowledge of the scheme.

The next largest creditor listed was Ira Sochet of Miami, a licensed investment adviser who, as a trustee, put in $147 million. Sochet could not be reached Thursday.

Investment groups from New York, Texas and Illinois also kicked in more than $100 million, according to the filing. In South Florida, auto magnate Morse Operations invested $44 million, and hotel owner Shimon Levy and his son, Ovadia, a combined $40 million, Stettin wrote.

Attorney Bill Scherer, who represent some investors who claim they were swindled, said in court Thursday that he estimates the government has about $100 million in Rothstein assets, far short of the estimated losses.

Prosecutor Alison Lehr said the government plans to "immediately liquidate" the recovered assets, in some cases by selling Rothstein's interest in various companies to their co-owners.

Paula McMahon can be reached at pmcmahon@SunSentinel.com or 954-356-4533.